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Difference affects the values of firm a and b

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Firm A and firm B are identical in business model, financial performance, risk management, etc. Analysts believe that firm A and B have similar expected future cash flows and cost of capital. The only difference is that A distributes 50% of its net profit to stockholders annually while B does not pay any dividends. Discuss how the dividend policy difference affects the values of firm A and B.

Reference no: EM133058069

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